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41 (136) 2019
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Finance & related services

Export finance as an answer to international trade tensions – the case of Pekao S.A., the second largest bank in Poland

by Piotr Stolarczyk, Managing Director of the International Banking & Export Finance Department / Andrzej Latoszek, International Transactions Office, Bank Pekao SA
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According to the OECD Interim Economic Outlook released in September, the global GDP will grow by 2.9% , down from 3.2% in its previous forecast.

The main barrier to growth is the mounting trade tension related to the increasing protectionism, which adversely affects international trade and the activities of businesses on foreign markets. Ultimately, it subdues the rate of economic growth. Political action should be taken at international and domestic level to put the global economy on a sustainable growth path. There is an urgent need to reduce trade tensions, especially in the area of disrupted trade agreements. Apart from balanced fiscal policy priorities, all economies should be more integrated and resilient to ensure appropriate trade volumes.

It is clear that the higher the GDP of the buyer's country, the higher the volume of the buyer’s purchases on foreign markets. Thus, referring to the destabilisation of global trade caused by increased trade tensions, we should expect a slowdown in foreign demand, which will also negatively impact global GDP growth by limiting productivity and investments.

Such dynamic changes in the global environment also affect Poland, for which exports have become a significant component of the economy over the past years. In 2018, Poland was the EU’s eighth largest exporter of goods and services, its exports accounting for nearly 4.2% of total EU exports. Globally, Poland is ranked 23rd. The dynamics of Polish exports in recent years has been more than twice higher than the GDP growth rate. According to data published by the Central Statistical Office, the compound average annual growth rate of exports has been about 8.5% since 2010.

A dynamic increase in the value of exports in relation to GDP has been noticeable for many years. As from 2010, the relation of Poland’s exports to GDP has increased by more than 15 percentage points, up to 55% in 2018.

Poland's accession to the EU significantly facilitated access of Polish enterprises to the EU market as all trade barriers were lifted. More than 80% of all the goods and services sent from Poland goes to the EU countries (the cumulative increase of exports from Poland to these markets in 2016-18 amounted to around 11%). Polish exports to the UK (which amounted to $16.2 billion / €13.7 billion) accounted for 6.2% of all Polish exports and remained at a stable level.  The UK is one of Poland’s top export destinations (third place). The compound average annual growth of exports from Poland to the UK amounted to around 7% p.a. in 2016-18. The reason for this is that Polish companies have preferred so far to sell their goods to the more proven and predictable markets. Geographical and cultural proximity was the key to success in foreign expansion.

Unfortunately, you should keep in mind such forecasts as the OECD’s which predict subdued GDP growth in highly developed markets – the G20 group, the Eurozone and the US. A too-high concentration of Polish exports to highly developed countries means dependence on the markets with a relatively low long-term dynamics of demand growth.

One of the major challenges faced by exporters is the availability of financing. According to the  research conducted in the last few years (Ahn, Amiti, 2011; Napiórkowski, Stolarczyk, 2018), there is a strong relationship between international trade and export financing –  access to finance triggers sales to international markets.

On foreign markets, Polish companies often have to compete with entities that have strong capital fundamentals. They are able to offer their customers (importers) very favourable financing conditions and extended payment terms. Secondly, proper risk management – the risk associated with a lack of payment from buyers for the executed contracts – is crucial. Therefore, when expanding to new markets, such as the UK, the Polish companies should cooperate with financial institutions such as Pekao S.A. – the second largest bank in Poland which, thanks to financing, can make their business offer more attractive, and thus can help them compete in international markets.

Our partners entering foreign markets should actively cooperate with us. It is worth taking advantage of our expertise and experience – a few dozen companies have already put their confidence in us. We prepare tailor-made solutions for companies taking into account their business model, the sector they operate in, as well as the target markets where they plan to expand. Thanks to a wide range of export financing products, Bank Pekao S.A. ensures safety in settlement of transactions and is able to make clients’ offer more attractive to their foreign partners.  

We are with our clients at every stage of their activity: starting from the decision to expand onto foreign markets right through to the settlement of transactions:

  • Our vast experience allows us to offer companies comprehensive advisory services, supporting them already at the stage of formulating key concepts and market-entry strategies

  • We propose financing structures that are optimal for the given type of business activity. We work closely with the insurers of export loans from the very early stage of transaction structuring

  • We offer competitive terms of financing of export activity, taking the payment and credit risk away from Polish exporter, eliminating the impact of this risk on the exporter’s balance sheet

  • We support exports to all countries in the world – even to exotic destinations burdened with higher risk

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